When you own or manage commercial property, there are seemingly endless ways to lose money: vandalism and theft, fires or floods, termite or pest infestation, or severe weather, just to name a few. Of course, those are just the things that can happen to the building and its contents. You also face risks that affect your business practices such as wrongful eviction and Fair Housing Act lawsuits, damage to a tenant’s belongings while having repairs done, or contractual disputes with tenants or contractors, just for starters.
It’s a daunting list of potential drains on your bottom line.
Unfortunately, substantial and complex risks are an unavoidable part of owning and managing property, and although you’ll never eliminate every possible risk, how you manage those risks can make or break you. You have to be constantly looking ahead and thinking about what unforeseen events could do to your property and your business, and finding ways to mitigate the effects of those events before they happen.
Make sure your commercial property risk management strategy has at least these five key elements:
1. A safety first mindset. Renters want a place that has a reputation for being safe and secure, so make sure your property fits the bill with these features:
- Doors and windows that are solid wood or steel with reinforced and shatterproof glass panels.
- Deadbolt locks on apartment entrance doors
- Adequate lighting in dimly lit areas in the building and on the property
- Security cameras to deter criminal activity and provide video evidence of falls and accidents
- Intercoms in multi-dwelling properties to allow tenants to talk to visitors before granting access
- Smoke and carbon monoxide detectors in each unit and in common areas
2. Thorough screening of prospective tenants. Just like employers need to thoroughly screen job applicants to get the best employees, you need to be diligent about screening prospective tenants. In addition to conducting an interview, have candidates fill out an application that includes information to enable a credit and background check, e.g., current employment, income information, current and former landlord contact information, and personal references.
3. A well-crafted rental contract. It can happen anytime – an irresponsible tenant disturbs the neighbors, destroys or damages property, or fails to pay the rent. To protect yourself and make the eviction process as painless as possible, you should always require a signed rental contract that clearly spells out both tenant landlord responsibilities, as well as grounds for eviction.
4. Pet policy. If yours is a pet-friendly rental, include a pet agreement that specifies the number, type, and breed of animals allowed; weight limit; and specific reasons a tenant might be asked to remove the pet.
5. Proactive insurance coverage. No matter how well you prepare for risks, exposures still exist, and the last thing you need is to find out after the fact that you’re not covered. At a minimum, you should be carrying property, liability, loss of rental income/business interruption, flood, and premises liability coverage. You may also need other types of real estate owners and developers coverage, depending on your business.
Like any other investment that needs to generate income to be successful, your property needs to attract tenants and generate income for your business to succeed. Make sure your risk management strategy is protecting your investment from all sides.
Partner with an expert
With the complexity of risks involved in owning and managing rental properties, you need a risk management expert in your corner who knows your business. At Heffernan Insurance Brokers, we specialize in the real estate and property owners business insurance. Let our experts provide a comprehensive review of your risks and your current coverage, and help you access the insurance products that fit your needs and your budget. Our program covers commercial, residential, mixed use, urban and rural properties.